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Farmers Could Confound USDA Acreage Projections

COLUMBUS, Ohio – Planting intentions by U.S. farmers continue to be a guessing game, but indications are showing a shift more heavily to soybeans, according to a recent report.

The annual Planting Intentions report released by the U.S. Department of Agriculture on Friday (3/30) indicates that soybean and corn acreage will be equal -- 76.7 million acres -- for the first time since

1983. Continued low corn prices, high costs of fertilizer and fuel, and a generous government support program are influencing farmers to shift corn acres to soybeans.

Allan Lines, Ohio State University agricultural economist, said the report does present some uncertainty, as farmers might not have finalized their plans when the USDA survey was taken on March 1. Friday's report projected acreage shifts almost twice as large as reported at USDA's outlook conference in February, indicating farmers are still thinking about it.

In February, USDA projected 1.5 million fewer corn acres, compared to 2.8 million fewer acres indicated in Friday's report. USDA's best guess for soybeans in February was 1 million more acres, while Friday's report indicates 2.2 million more acres.

In the meantime, a survey taken March 27 and 28 by Data Transmission Network (DTN) showed farmers intended to plant slightly more soybean acres and slightly fewer corn acres than indicated by USDA. "This possibly means an additional shift away from corn that USDA didn't capture

in the March 1 estimate," Lines said.

Market reaction to Friday's report was a 5 cents per bushel increase in corn prices, and only a 1-2 cent drift in soybean prices, a surprise that Lines could not explain given the large intended acreage shift since last year. As for the longer-term price outlook, Lines said the report "compounds the potential for higher corn prices and provides more evidence to support lower bean prices."

Things could change rapidly next month as weather conditions throughout the Corn Belt have a more immediate impact on farmer's planting intentions, Lines said. Good weather in late April and early May would favor corn, which requires a longer growing season for optimal yields. Nasty early conditions could prompt farmers to favor even more soybeans by mid- to late-May.

Lines said last season showed that farmers' actions can defy the planting intentions report. Favorable early weather prompted them to plant 1.6 million more corn acres than intended on March 1, 2000. Farmers' actual plantings sent markets into a frenzy. "In any given year, USDA could be off sharply, and last year they were off sharply," he said. "The good weather across the Midwest encouraged more corn planting than what USDA reported."

Friday's report could also influence farmers' planting intentions, as a more favorable corn price outlook would shift acreage in that direction. "The report itself could change things, given the downward tilt in corn acres by 2.8 million acres," Lines said. "That has the potential to strengthen corn price, especially if we get an exceptional positive response for corn."

Lines recommends that farmers position themselves to take advantage of higher corn prices, if they materialize, and to protect themselves from potentially lower bean prices. Growing season weather could be a big factor in directing the market. "If this intended corn acreage gets planted and we encounter drought problems, then corn markets are going to be put in a position where they won't know where the top is."

A drought could also push up bean prices to the $6 per bushel range. Excellent growing conditions, on the other hand, could cause bean prices to drift into the $3 per bushel range.